P. 1
sector analysis of banking in india

sector analysis of banking in india

|Views: 160|Likes:
Published by Gayatri Mudliar

More info:

Published by: Gayatri Mudliar on Apr 08, 2011
Copyright:Attribution Non-commercial


Read on Scribd mobile: iPhone, iPad and Android.
download as DOCX, PDF, TXT or read online from Scribd
See more
See less








For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has rea ched even to the remote corners of the country. This is one of the main reasons of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. Those are:Early phase from 1786 to 1969 of Indian Banks Nationalizations of Indian Banks and up to 1991 prior to Indian banking sector Reforms New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991 The steps taken by the Government of India to Regulate Banking

Institutions in the Country: 1949: Enactment of Banking Regulation Act. 1955: Nationalization of State Bank of India. 1959: Nationalization of SBI subsidiaries. 1961: Insurance cover extended to deposits. 1969: Nationalization of 14 major banks. 1971: Creation of credit guarantee corporation. 1975: Creation of regional rural banks. 1980: Nationalization of seven banks with deposits over 200crore.

For the past three decades India's banking system has several outstanding achievements to its credit. It is no longer confined to only metropolitans or cosmopolitans in India; in fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalisation of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money has become the order of the day.

Post independence 
In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, an d it
became an institution owned by the Government of India. 

In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of
India (RBI) "to regulate, control, and inspect the banks in India." 

The Banking Regulation Act also provided that no new bank or branch of an e isting bank
may be opened without a license from the RBI, and no two banks could have common directors.



challenges posed by the technology and any other e ternal and internal factors


banking system of India should not only be hassle free but it should be able to meet ne



Without a sound and e ective banking syste


in India it cannot have a healthy economy The

Current situation

Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock e changes) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively. Over the last four years, India s economy has been on a high growth trajectory, creating unprecedented opportunities for its banking sector. Most banks have enjoyed high growth and their valuations have appreciated significantly during this period. Looking ahead, the most pertinent issue is how well the banking sector is positioned to cater to continued growth. A holistic assessment of the banking sector is possible only by looking at the roles and actions of banks, their core capabilities and their ability to meet systemic objec tives, which include increasing shareholder value, fostering financial inclusion, contributing to GDP growth, efficiently managing intermediation cost, and effectively allocating capital and maintaining system stability.








The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. In the early 1990s the then Narasimham Rao government embarked on a policy of liberalization and gave licenses to a small number of private banks, which came to be known as New Generation techsavvy banks, which included banks such as Global Trust Bank (the first of such new generation banks to be set up)which later amalgamated with Oriental Bank of Commerce, UTI Bank(now re-named as Axis Bank), ICICI Bank and HDFC Bank.

In January 1993. RBI has issued guidelines for licensing of new banks in the private sector. It had granted licenses of new banks in the private sector. It has granted licenses to 10 banks which are presently in business based on a review of experience gained on the functioning of new private sector banks, revised guidelines were issued in January 2000. Following are the
§ §

major revised provisions y

Initial minimum paid up capital shall be Rs 200 crore which will be raised to Rs 300 crore within three years of commencement of business.


Contribution of promoters shall be minimum of 40 per cent of the paid up capital of the bank at any point of time. This contribution of 40 percent shall be locked in for 5 years from the date of licensing of the bank.


While augmenting capital to Rs 300 crore within three 7yeaRs promoters shall bring in at least 40 percent of the fresh capital which will also be locked in for 5 years.


NRI participation in the primary equity of a new bank shall be to the maximum extent of 40 per cent.


information and services. Lower CRR & SLR 5. political and Technological integration of the world. Technology. Help banks in proper allocation of funds across various business lines and adapt global best 2. Increase in Capital Ade uacy Ratio 3. Entry into new business lines 8. Various reform measures introduced in India have indeed strengthened the Indianbanking system in preparation for the global challenges ahead. Globalization has led to an overall economic. Asset classification and provisioning norms 7. Deregulation of deposit   Impact on Banks 1. Deregulation of lending rates 4.GLOBALISATION Int odu tion Globalization refers to widening and Deeping of international flow of trade. Encourage banks to strengthen their credit and this brought down the NPA generate rate 7.  2. Availability of more funds for lending 5. capital. Helped banks to gain control over cost of deposits practices of risk management to enhance their competitiveness. Emerge as financial super markets and build the top and bottom line 8. Flexibility to price loan products and competitive pricing 4. first economic reforms (1991) gave birth to globalization and second phase of banking sectorreforms strengthened the globalization. More stability in the banking system 3. labour. In our country. Increased thrust on banking supervision and risk management 6 . The major impact of banking sector reforms can be viewed from the following chart: © ¨ Indi n Banking on th Refo ms Path Refo ms Initiati es 1.

· Increased revenue.Globalization. which is outcome of economic reforms. Consolidation of Banks: Consolidation is a crucial preparatory step to be undertaken by banking sector in India. The present paper analyzes the impact of globalization on Indian banking from the point view of penetration of Indian banks in foreign countries and compares the performance of Indian banks particularly the performance of branches operating in foreign countries with that of foreign banks operating in India and at the end suggests some strategies for the globalization of Indian banks. therefore the government has a big role in establishing the framework. Weak banks need to exit and one of the options will be to merge with a stronger bank. there has been an urgent need to serve the customers promptly and efficiently. with more and more global players operating in India. 7 . is both a challenge and an opportunity for Indian banks to gain strength in the domestic market and increase presence in the global market. size and scale · Increased productivity by reducing transaction cost · Benefits to stakeholders through lesser intermediation cost · Increased ability to meet competition from global banks · Easy mobilizing resources from the market Asset Quality: Indian banks should concentrate on asset quality and earnings there from. which will include flexible labour laws. Mergers amongst public sector banks are politically very sensitive. Globalization and Future Opportunities for Indian Ban s Globalization will gain greater speed in the coming years with the opening up of the financial sectors under WTO regime. Global Players and Customer s Satisfaction: In the emerging scenario.

placements should be given to banks. E-Delivery Channels: The Indian banks particularly public sector bank s should create awareness among the masses about all the e -delivery channels with demo for how to operate and use. size is no longer a key indicator in the banking industry. They should also increase their productivity and profitability because at the present day context. Customer Experience: Creating uniform transaction experience. Efficient Capital Markets: An efficient capital market should be developed to channelize private savings into infrastructure financing. developing appropr iate delivery strategies and strengthening CRM are some of the key requirements for banks. Autonomy in HRM : Autonomy in HRM areas such as deciding categorization o f branches. They should provide efficient services through e -delivery channels. profitability and efficiency is quite higher in partially privatized public sector banks. The government should continue the process to make the Indian banks competitive at the global level. which include unlocking mone y from real estate investment to strengthening capital.Competitiveness in Banks: Domestic banks should begin to make themselves as competitive as possible. 8 . Privatization of Public Sector Banks : Productivity. Resources Optimization: Asset optimization. human resources optimization and value sourcing with the focus on risk and associated benefits besides cost arbitrage. vacancy.

Information Technology Indian banks must build their expertise in rolling out technology and in Basel . 9  . The selection will depend on the ability to implement technology. Acquisitions of Retail Banks Acquisitions should be of retail banks in selected markets. insurance ventures and credit rating agencies.related investments in this sector and these countries.Strate ies for Globalization of Indian Ban s The following are the strategies for the globalization of Indian banks Cadre of Experts A cadre of experts needs to be built up.II. improve customer service and upgrade to Basel-II. especially as Indian and China are becoming large consumers and there is an expectation of large India related and Asia. Strategic alliances Strategic alliances with national banks in oil rich countries can be very valuable. IT can explore new possibilities in foreign countries. approaching them off and on for trenches of capital subscription. personnel should have exposure in functioning in truly global environment. Together they can face even tough competition at global level. investment banks. Indian banks should try t o capture at lower cost Linkages with other financial or ganization Indian banks have linkage with the rest of the finance infrastructure in India such as term lenders. International Capital Markets We should be active in international capital markets.

Set The bankers should change their own mindset to win the customers in other countries.Research of Products and Servi ces Indian banks should make comprehensive research in foreign countries regarding the financial requirements of the people and then they should enter in a big way. It will help to win potential customers. Incentives Indian banks should provide allurement and incentives to the potential customers in the beginning. Effective Advertisements Indian banks should make effective and attractive advertisements according to the customer s tastes regarding our financial products. Change in Mind . Prices of Products and Services At the initial stages Indian banks should provide products and services at comparatively lower prices to capture their market share. Alliance with Big Houses/Companies Indian banks should make some alliance with profit making big houses and companies to capture foreign market. Effective CRM Indian banks should make effective CRM in foreign countries. 10 . A friendly customers environment should help to penetrate in other countrie s.

However.Though there are 33 foreign banks operating in our country.Risk management needs maximum focus when expanding internationally. others only in India have marginal presence . present in India for more than hundred years. .g. Grind lays Bank sold its Indian operation to Standard Charted Bank and exited. . though. and (b) Differing corporate cultures The failures of Japanese banks in US partly relate to culture mismatch. every country should keep in mind: (a) Differing national cultures. effective methods should be adopted for all the transactions. there are mixed experiences e. 11 .While entering new areas. had to close its Panama branch for bad external relations . e.A major lesson is that the management processes in the cross -border initiative should be aligned with the culture.SBI presently has planed to increase its presence in the globa l market from the present 54 to 75 branches Some of the lessons that can be drawn are as under: .BNP Paribas. .SBI.In India. .After acquisition. It is necessary to announce at the time of acquisition itself as to what the approach/goals of the acquired entity will be post-acquisition. . there is a need for the top management to be aware of the emerging areas in finance. decided to shut its Indian operations .g. There are two vital aspects. especially international ly. only top four. It is a natural progression for any organization.Experiences and Lessons fro Ban s Which Went Global Going global is the way forward for banks to gain size and scale.

some them having their genesis in the nineteenth century. 12 . Commercial Banks operating in India fall under different sub categories on the basis of theirownership and control over management. Initially they were set up in large numbers. Today 27 banks constitute a strong Public Sector in Indian Commercial Banking. commercial banks are the oldest institutions. mostly as corporate bodies with shareholding with privateindividuals.BANKING STRUCTURE IN INDIA RESERVE BANK OF INDIA SCHEDULED BANKS COMMERCIAL BANKS CO-OPERATIVE BANKS PRIVATE BANKS (31) URBAN CO-OPERATIVE (52) OLD BANKS (23) STATE CO-OPERATIVE (16) NEW BANKS (8) PUBLIC SECTOR BANKS (27) SBI AND ASSOCIATES (8) NATIONALIZED BANKS (19) The banking institutions in the organized sector.

 13 . Maharashtra and Andhra Pradesh. no new bank could be setup in India for about two decades.Public Sector Ban s Public Sector Banks emerged in India in three stages. ICICI. Thus 27 banks constitute the Public Sector Banks.  New Private Sector Ban s After the nationalization of the major banks in the private sector in 1969 and 1980. These guidelines aim at ensuring that new banks are financially viable and technologically up to da te from the start. and UTI etc. The Narasimham Committee on financial sector reforms recommended the establishment of new banks of India. The minimum paid up capital of such banks would be 5 crores with promoters contribution at least Rs. though there was no legal bar to that effect. Eight private sector banks have been established including banks sector by financially institutions like IDBI. followed by the taking over of the seven associated banks as its subsidiary. 2 crores. companies. so as to improve the image of commercial banking system and to win the confidence of the public. four local area banks are functional. Gujarat. They have to work in a professional manner.  Local Area Ban s Such Banks can be established as public limited companies in the private sector and can be promoted by individuals. RBI thereafter issued guidelines for setting up of new private sector banks in India in January 1993. one each in Punjab. They are to be set up in district towns and the area of their operations would be limited to a maximum of 3 districts. At present. trusts and societies. First the conversion of the then existing Imperial Bank of India into State Bank of India in 1955. Second the nationalization of 14 ma jor commercial banks in 1969and last the nationalization of 6 more commercial Bank in 1980.

14   Scheduled Co ercial Ban s in India . There number was 38 as on 31. but does not include a co -operative bank".03. 1949 (10 of 1949). 1970 (5 of 1970). a subsidiary bank as defined in the S tate Bank of India (Subsidiary Banks) Act. 1934. "Non-scheduled bank in India" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act. or under section 3 of the Banking Companies (Acqui sition and Transfer of Undertakings) Act. 1934 (2 of 1934).2009.Forei n Ban s Foreign commercial banks are the branches in India of the joint stock banks incorporated abroad. "Scheduled banks in India" means the State Bank of India constituted under the State Bank of India Act. which is not a scheduled bank". RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section42 (6) a) of the Act. 1980 (40 of 1980). a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act. or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act.   The commercial banking structure in India consists of:  Scheduled Commercial Banks in India  Unscheduled Banks in India Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India (RBI) Act. 1959 (38 of 1959). 1955 (23 of 1955).

088 ATMs. there exists in India another set of banking institutions calle d cooperative credit institutions. Taking into account all banks in India. These have been made in existence in India since long. there financial position is not sound and a majority of cooperative banks has yet to achieve financial viability on a sustainable basis. The cooperative banks have been set up under various Cooperative Societies Acts enacted by State Governments. 15  .Cooperative Ban s Besides the commercial banks. They undertake the business of banking both in urban and rural areas on the principle of cooperation. 82 per cent of staff and 60. They have served a useful role in spreading the banking habit throughout the country. In 1966. 893.7 per cent of all offices.356 employee s and 27.640 branches or offices. with 87.3 per cent of all automated teller machines (ATMs). there are overall 56. Public sector banks made up a large chunk of the infrastructure. Yet. Hence the State Governments regulate these banks. need was felt to regulate their activities to ensure their soundness and to protect the interests of depositors According to the RBI in March 2009. 86 were Regional Rural Banks and the number of Non -Scheduled Commercial Banks including Local Area Banks stood at 5. number of all Scheduled Comme rcial Banks (SCBs) was 171 of which.

besides of course investment banking. etc 16 .insurance. investment fluctuation reserve. Such bank. 1934. as follows: It must have paid-up capital and reserves of an aggregate value of not less than an amount specified from time to time. Adoption of prudential norms in terms of capital adequacy. credit cards. leasing. or rural. Government equity in banks has been reduced and strong banks have been allowed to access the capital market for raising additional capital. infrastructure financing. and It must satisfy RBI that its affairs are not being conducted in a manner detrimental to the interests of its depositors. is entitled to faci lities of refinance from RBI. New areas have been opened up for bank financing like . The relationship is established once the name of a bank is included in the Second Schedule to the Reserve Bank of India Act. cooperative. called a scheduled bank. subject to fulfilment of the following conditions laid down in Section 42 (6) of the Act. gold banking.Reserve Bank of India RBI is the banker to banks whether commercial. MAJOR REFROMS INITIATIVES Some of the major reform initiatives in the last decade that have changed the face of the Indian banking are:Interest Rate Deregulation-Interest rates on deposits and lending have been deregulated with banks enjoying greater freedom to determine their rates. New private sector banks have been set up and foreign banks permitted to expand their operations in India including through subsidiaries. income recognition. asset management. Banks have specialized committees to measure and monitor various risks and have been upgrading their risk management skills and systems. provisioning. exposure limits. factoring. etc. asset classification.

2005. Developments which have taken place during the last few years all have IT as the pivotal centre-point. Some of the major developments which have taken place since then are as follows: Core Banking Systems (CBS) Internet Banking Mobile Banking Mobile Automated Teller Machines (ATMs) Multifunction al ATMs shared ATM services Large scale usage of Real Time Gross Settlement (RTGS) SERVICES PROVIDED BY BANK Demat Account Lockers Cash Management Insurance Product Mutual Fund Product Loans ECS(Electronic clearance system) Taxes 17 . as far as IT implementation is concerned. Since the publication of the Financial Sector Technology (FST) Vision in July. there have been significant changes in the banking sector of the country. Information Technology (IT) continues to be the single largest facilitating force behind the successful transformation of transactions and ] analytical processing of banking business in the count ry. The financial sector of the country has become more IT savvy and the Banking sector in particular is one of the largest users of IT and IT enabled services.IT AGE BANKS ADOPTING IT IT usage by banks in India has come of age. The Reserve Bank too has enhanced the usage of IT as a tool for better performance and overall systemic efficiency.

If. Company News And Other News: The way investors interpret news coming out of companies is also a major influence on share prices. Thus. Companies put out a great deal of news and most of 18 . a direc tor buys shares in the firm. a company puts out a warning that business conditions are tough.FACTORS AFFECTING SHARE PRICE BAN ING SECTOR There are N number of factors which affect the share prices. they are internal to the company or more specifically bank. the investors show no interest in such banks share and thus price falls. however. They can be broadly classified into two: INTERNAL FACTORS EXTERNAL FACTORS INTERNAL FACTORS: As the name suggests. Some of the major internal factors that affect the share prices of a bank are as follows: Earning of the company : How much Profit a company earns acts as a significant factor in price movements. Investors invest money in the companies who earn well and in turn give good return on investment. Internal Factors are those which affect the share prices internally. i. a wealthy and a profitable company have good investors and thus have positive price movements. and if the results are not good. shares will often drop in value.e. for example. Price/Earnings Ratio also gives us idea about the same. then the price goes up. If the quarterly results are good for a bank. it may be a signal that the company s prospects are improving. If.

Positive news about a company can increase buying interest in the market while a negative press release can ruin the prospect of a stock. Takeovers or even rumours of takeovers also have a big influence on prices. we must always remember that often times. Having said that. particularly among smaller firms that are monitored less by investors and financial journalists. A positive note from the internal affairs takes the price to new highs and a negative does vice versa. despite amazingly good news. For example any key person moving out of the company. a sto ck can show least movement.the major announcements are covered by the financial press. acquisition or takeover or merger news. Thus. Internal Affairs Of The Company: Any happening inside the company or any internal news does affect its share price. employee strike and any other thing internal to the affairs of the bank affects the share price. It is always wise to take a wait and watch policy in a volatile market or when there is mixed reaction about a particular stock. any change or likely change in the policies of government or RBI or SEBI. etc. Cash Reserve Ratio. affect the price of the share. 19 . This is because investors expect the bidder to pay a premium to shareholders. A positive news in any of these respects leads to a rise in price and a negative takes it to the other side. Also any other news or speculation about factors like change in Repo Rate. indicators of the company s health can be missed. news in any respect is undoubtedly a huge factor when i t comes to stock price. But some announcements not regarded as so important and sometimes. It is the overall performance of the company that matters more than news. share split. any n ew guidelines issued by the concerned authority. Reverse Repo Rate.

Thus. Sentiments of investoRs affect the share prices a lot and this is something unpredictable and immeasurable factor. We need to multiply the stock price with the total number of outstanding stocks in the market to get the market capitalization of a company and that is the worth of the company. be flat during the summer simply because so many major investors are on holiday or attending major sporting events such as Royal Ascot and Wimbledon. investors paid extremely high prices for shares and ignored traditional valuation measures. such as P/E ratios. Investor sentiment is influenced by a wide variety of factors. that is more important when it comes to determining the worth of the company. Sentiments: Investor sentiment is almost impossible to predict and can be infuriating if. but still the most important one. Thus. For example. ICICI BANK and SBI are more popular among investoRs than other banks because they have huge market share and market capitalization. In the technology boom of the late 1990s. As market capitalization increases. you have bought shares in a company that you think is a good buy but the price remains flat. for example.EXTERNAL FACTORS: After studying the internal factors. Market Capitalization: Generally we commit one mistake that we guess the company s worth from the price of its stock. A bull market is when share prices rise while a bear market is when they fall. hence the adage sell in May and go away . Share prices can. It is the market capitalization of the company. lets take a look at some External Factors which affect the Share Prices. Investor sentiment can lead to irrational buying or selling of shares and result in bull and bear markets. rather than the stock price. for example. the share price tends to increase and as market capitalization decreases. 20 . the share price tends to decrease. for example. a company or bank with high Market Capitalization turns out to be more popular among investo Rs. This carried on until 2000 when investoRs belatedly realized these shares has risen too far and resulted in a three year bear market in shares. HDFC BANK.

the shares will often rise in value. If an analyst changes their recommendation from sell Analysts to buy . We should remember that the recommendation an analyst puts on a company will affect its share price very quickly and can become irrelevant within hou Rs. even if the recommendation is out of date. On the other hand. Analysts Reports: Reports produced by independent analysts also influence share prices. The earnin gs also have a direct relation with price which is already explained above. When more peo ple are buying a certain stock. although some stockbrokeRs will make their research available to private investoRs. we should be very careful while dealing in stocks as buy ing or selling pressure may lead to steep rise or fall in price of the shares. The price is directly affected by the trend of stock market trading. Now it is difficult to predict the trend. the price of that particular stock falls. If the price moves above their and so the shares are not targets the improvements the analyst expects may be priced in worth buying. Some investment banks also publish their reports on their websites for free. if the price is way too much higher than the actual earning of the company and then the stock is said to overvalued and the price can fall at any point. We may find summaries of some reports published on financial news websites or in newspapeRs and magazines. This is because the analyst will usually say a stock is a buy within a particular price range. for example. The reports usually contain a great deal of useful in fromation on the company and 21 . reports are produced primarily by investment banks for professional investo Rs. Demand And Supply : This fundamental rule of economics holds good for the equity market as well. the stock is undervalued and it has the potential to rise in the near future. If the price of the share is too much lower than the earning of the company. the price of that stock increases and when more people are selling the stock. But analysts reports are always worth reading.Price/Earnings Ratio: Price/Earnings ratio or the P/E ratio gives us a fair idea of how a company's share price compares to its earnings. Thus.

a change in these policies affects the market scenario. EXIM regulations. rules and regulations and procedures. the performance of an economy and its banks is affected by these global changes. the share market crashed literally. RBI keEPS on changing rates like Repo Rate. Then in this case. They also often look at how the company rate s against its competitoRs. a careful and logical investor always keEPS this in mind that what global changes affect the market and thus leads to rise or fall in share prices.how its business is developing. Change in Government Policies: Keeping in mind the progress and well wishes about the country. So. ReveRse Repo Rate and Cash Reserve Ratio. When it entered India. These rates have a direct relation with the Bank s performance and in turn the share prices are linked with Bank s Performance. the government takes desired steps and keEPS on reviewing its policies. For example: The recession was first observed in the USA and later on it caught its lead in other countries too. Thus. some restriction would follow and this will definitely affect the share prices 22 . then the competition would rise and it might happen that those foreign Banks may outperform and leave our own banks far behind. a change in these rates or even a speculation of change in these rates affects share p rices. Global Changes: Any change in the global economy or in other words global changes also affects Indian economy. A change in FDI and FII inflow restrictions. etc from part of important government policies. entry exit barriers for foreign banks in India. OTHER FACTORS: Some other factoRs which influence share prices are as follows: Change in Rates by RBI: Looking at the changing scenario. change in Basel Norms. Thus. Thus. the investoRs would be interested in investing in those foreign Banks and a govern ment would never like that the funds are invested in some foreign banks rather than our own banks. Thus. For example: if government allows entry of foreign Banks in India.

These changes include strengthening prudential norms.O. y Policy makers have made some notable changes in policy and regulation to help strengthen the sector. ! ! y In terms of uality of assets and capital ade uacy. Indian banks are considered to have clean. Extensi e reach: the vast networking & growing number of branches & ATMs. y y Bank lending has been a significant driver of GDP growth and employment.S. strong and transparent balance sheets relative to other banksin comparable economies in its region. Indian banking system has reached even to the remotecorners of the country. The banking index has grown at a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index for the same period. asset uality and profitability with other regional banks over the last few years.W. y The government's regular policy for Indian ba since 1969 has paid rich dividends with nk the nationalisation of 14 major private banks of India.T ANALYSIS OF BANKING INDUSTRY STRENGTH  y Indian banks have compared favourably on growth. enhancing the payments system and integrating regulations between commercial and co-operative banks. 23 .

000 branches and 17.2% and 6. the public sector banks hold over 75 percent of total assets of the banking industry. they may be publicly listed and traded on stock exchanges) and 31 foreign banks. y Foreign banks will have the opportunity to own up to 74 per cent of Indian private sector banks and 20 per cent of government owned banks. y y Old private sector banks also have the need to fundamentally strengthen skill levels. a rating agency. The cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies. $ $ $ 24 . They have a combined network of over 53. y Structural weaknesses such as a fragmented industry structure. 29 private banks (these do not have government stake.27 public sector banks (that is with the Government of India holding a stake)after merger of New Bank of India in Punjab National Bank in 1993. restrictive labour laws. According to a report by ICRA Limited.5% respectively.y India has 88 scheduled commercial banks (SCBs) . service operations.000 ATMs. with the private and foreign banks holding 18. weak corporate governance and ineffective regulations beyond Scheduled Commercial Banks (SCBs). lack of institutional support infrastructure. unless industry utilities and ser vice bureaus. y I pedi ents in Sectorial refor s: Opposition from Left and resultant cautious approach from the North Block in terms of approving merger of PSU banks may hamper their growth prospects in the medium term. # # " y Refusal to dilute sta e in PSU ban s: The government has refused to dilute its stake in PSU banks below 51% thus choking the headroom available to these banks for raining equity capital. risk management and the overall organisational performance ethic & strengthen human capital. restrictions on capital availability and deployment. WEA NESS y PSBs need to fundamentally strengthen institutional skill levels especially in sales and marketing.

At the same time. y New private banks could reach the next level of their growth in the Indian banking sector by continuing to innovate and develop differentiated business models to profitably serve segments like the rural/low income and affluent/HNI segments. consumer finance and wealth management on the retail side. 25 . Given the demographic shifts resulting from changes in age profile and household income. y y reach in rural India for the private sector and foreign banks. mortgages and investment services are expected to be strong. Maintaining a fundamentally long-term value-creation mindset. consumers will increasingly demand enhanced institutional capabilities and service levels from banks. competition from foreign banks will only intensify. credit and operatio ns. and in fee-based income and investment banking on the wholesale banking side.OPPORTUNITY y The market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards. These require new skills in sales & marketing. With the growth in the Indian economy expected to be strong for quite some time especially in its services sector-the demand for banking services. Attracting. This will expose the weaker banks. they should stay in the game for potential acquisition opportunities as and when they appear in the near term. y \banks will no longer enjoy windfall treasury gains that the decade -long secular decline in interest rates provided. y y With increased interest in India. especially retail banking. developing and retaining more leadership capacity y Foreign banks committed to making a play in India will need to adopt alternative approaches to win the race for the customer and build a value-creating customer franchise in advance of regulations potentially opening up post 2009. actively adopting acquisitions as a means to grow and reaching the next level of performance in their service platforms.

This enabled banks and financial institutions. THREATS y Threat of stability of the system: failure of some weak banks has often threatened the stability of the system.y the Reserve Bank of India (RBI) has approved a proposal from the government to amend the Banking Regulation Act to permit banks to trade in commodities and commodity derivatives. compared to 20% foreign equity holding allowed in PSU banks. Significantly. it would help PSU banks. % y Liberalization of ECB nor s: The government also liberalized the ECB norms to permit financial sector entities engaged in infrastructure funding to raise ECBs. FII and NRI investment limits in these securities have been fixed at 49%. explore this route for raisin g cheaper funds in the overseas markets. which were earlier not permitted to raise such funds. Increase in the number of foreign players would pose a threat to the PSB as well as the private players. If the new instruments find takers. y Hybrid capital: In an attempt to relieve banks of their capital crunch. the RBI has allowed them to raise perpetual bonds and other hybrid capital securities to shore up their capital. y y Rise in inflation figures which would lead to increase in interest rates. 26 . left with little headroom for raising equity.

UNION BUDGET IMPACT ON BANKING SECTOR The Indian banking sector has emerged unaffected from the economic crisis which recently hit the world. 2011 ( ' ' Union Budget 2010 Initiati es for Regional Rural Banks Over the years Regional Rural Banks (RRBs) have played a significant part in offering monetary help to rural economy. Hence to ensure the continuance of the sector's economic expansion and to meet the pre-re uisites of a new financial system. Central Government and State Governments. if the latter satisfies the RBI's re uirements.500 crore to guarantee that the public sectorplayers can achieve 8 Tier-I funds by March 31. the FM suggested an amount of Rs. the Government invested Rs. In addition an extra amount of Rs. & & Union Budget 2010 Impact on banking sector The Finance Minister in his Union budget 2010speech proposed banking licenses to Indian banks to ensure the expansion of banking sector in size and turnover. & Union Budget 2010 Initiati es for Public Sector Bank During the financial year 2008-09. The funds derived from these banks are distributed among the subsidized banks. FM proposed the re uirement of international exposure to banks and improvement in the accessibility of banking services.16.1900 crore as Tier-I funds in 4 public sector players to uphold a contented level of Capital to Risk Weighted Asset Ratio.1200 crore has been invested currently and for the FY 2010-11. He thus notified the consideration of RBI in offering extra banking licenses to private banks and also to non Banking Financial Companies. Keeping in consideration that 27 . In his Union Budget 2010 speech the FinanceMinister Pranab Mukherjee announced few benefits and initiatives which are projected to trigger the expansion and have a great impact on banking sector in FY 2010-11.

it is essential to focus on cost saving. the FM proposed investment of more capital in order to reinforce the functioning of RRBs and to assist an improved lending to the rural financial system Key players Andhra Bank Allahabad Bank Punjab National Bank UTI Bank Kotak Mahindra Bank Citibank HSBC Bank American Express Bank State Bank of India Vijaya Bank HDFC Bank ICICI Bank Centurion Bank of Punjab Standard Chartered Bank State Bank of Mysore ABN AMRO Vision of ban s in India The banking scenario in India has already gained all the momentum. determined by revenue minus profit. (This means that all the resources should be used efficiently to better the productivity and ensure a win-win situation. with the domestic and international banks gathering pace.) 28 . ( which meant that banks aimed at higher profit maximization.the banks were last subsidized in FY 2006-07. banks shifted their approach to the 'profit' model. )  The focus of all banks in India has shifted their approach to 'cost'. (Previously. banks focused on the 'revenue' model which is equal to cost plus profit.)  Post the banking reforms.)  To survive in the long run.

7% between 1994-95 and 2002-03. 0  The total assets of all scheduled commercial banks by end-March 2010 is projected to touch Rs 40.000 cr. pace of deposit growth slowing down side by side.  People will rely more on borrowed funds. on the liability perspective. there will be huge additions to the capital base and reserves.90.4% during the rest of the decade as against 16.Focus of ban s in India The banking industry is slated for growth in future with a more qualitative rather than quantitative approach. However.  The bank's assets are estimated to grow at an annual composite rate of growth of 13. advances and investments would not see a healthy growth 29 . This is going to comprise around 65% of GDP at current market prices as compared to 67% in 2002 -03.  Barring the asset side.

FY11 net market borrowings of Government estimated at lower Rs3. 30 .45tn. IFCI. Syndicate Bank. UCO Bank & United Bank of India. with pick up in credit demand clarity over the borrowing programme will ensure adequate moves in interest rates.POSITIVE IMPACT ON BANKING Key announcements What came in? New banking licenses for few private sector players and NBFC s subject to meeting RBI s eligibility criteria. fiscal deficit for the year pegged at 5. M&M Financial services. Positive for Housing Finance Companies and Banks with home loan portfolio. Positive for banks as it would improve ALM and increase funding to the sector Positive for the sector. Positive for the sector in general as it aims at reaching unbanked areas thereby increasing the penetration levels of Insurance and other finan cial products.Dena Bank. Interest subvention of 2% for farmers who repay their shortterm crop loans on schedule. Capital Infusion of Rs165bn for PSU banks in FY11 thereby enabling them maintain Tier I capital above 8% by March 31.5% of GDP Extension of interest subvention scheme to March 31. Positive for small PSU Banks . and leaving negligible impact on bank s treasury book. 2010 IIFCL to refinance bank lending towards infrastructure projects. 2011 on housing loans up to Rs1mn on property value up to Rs2m. Positive for PSU Banks. Extension in repayment of the loan under the Debt Waiver and Debt Relief Scheme for farmers by six months to June 30. 2011. Impetus towards Financial Inclusion Impact Positive for NBFC s such as Reliance Capital. Neutral as long as the interest part waived is re-paid by the Go to banks.

During the 1900s Kolkata became another major centre of share trading and as a result Kolkata Stock Exchange wasformed in 1908. It was this association which later became the Bombay Stock Exchange. The association drew up codes of conduct for brokerage business and mobilizes private funds for investment in the corporate sector. shares of companies used to be floated in India occasionally. Mumbai or BSE Later on in 1894 the brokers of Ahmadabad formed the Ahmadabad Stock Exchange. at Indore in 1930. However. Three more stock exchanges were esta blished before independence. During the latter half of 19th century. the second stock exchange of the country. at Hyderabad in 1943 and at Delhi in 1947. There were share brokers in Bombay who assisted in the floatation of shares of companies. A small group of stock brokers in Bombay joined together in 1875 to from an association called Native Share & StockbrokeRs Association. Later on Chennai Stock Exchange was started in 1920. it ceased to exist.STOCK MARKET IN INDIA The Indian security market has become one of the most dynamic and efficient security markets in Asia today. Thus along with the increase in number of stock exchanges. the number of listed companies and the capital of listed companies grown tremendously after 1985 which res into growth and development ults of stock market in India. by 1923. Then the Madras Stock Exchange was started in 1937. 31 . The Indian market now conforms to International Standards in terms of operating efficiency.

Instead of using a company's outstanding shares it uses its float. 1979. At irregular intervals. the Bombay Stock Exchange (BSE) authorities review and modify its composition to make sure it reflects current market conditions. the long -run rate of return on the BSE SENSEX works out to be 18. It consists of the 30 largest and most actively traded stocks. a variation of the market cap method. does not include restricted stocks. 1986. thirteen sector specific indices and a B SE Dulled Index for dollar prices and movements. on the Bombay Stock Exchange. The freefloat method. These companies account for around one-fifth of the market capitalization of the BSE. The base value of the SENSEX is 100 on April 1. representative of various sectors. and the base year of BSE -SENSEX is 1978-79.ABOUT BSE SENSEX BSE SENSEX or Bombay Stock Exchange Sensitive Index is a value-weighted index composed of 30 stocks started in 01 of January.6% per annum. There are five major indices in BSE. therefore. or shares that are readily available for trading. such as those held by company insiders. The index has increased by over ten times from June 1990 to the present. 32 . which translates to roughly 9% per annum after compensating for inflation. The index is calculated based on a free -float capitalization method. Using in fromation from April 1979 onwards.

33 . making it the second largest stock exchange in South Asia. insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. The NSE's key index is the S&P CNX Nifty. known as the Nifty. There are seven major Indices in NSE and fifteen sector specific Indices. Though a number of other exchanges exist. is the leading index for large companies on the Nati onal Stock Exchange of India. for bot h equities and derivative trading.ABOUT NSE AN NIFTY 50 The National Stock Exchange of India Limited (NSE) is a Mumbai-based stock exchange. It is used for a variety of purposes such as benchmarking fund portfolios. 2799 in total. It is the second fastest growing stock exchange in the world with a recorded growth of 16. There are at least 2 foreign investo Rs NYSE Euro next and Goldman Sachs who have taken a stake in the NSE. As of 2006.46 trillion. It is the largest stock exchange in India in terms of daily turnover and number of trades. cover more than 1500 cities across India. the equity market capitalization of the companies listed on the NSE was US$ 1. The Standard & Poor's CRISIL NSE Index 50 or S&P CNX Nifty nicknamed Nifty 50 or simply Nifty. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. an index of fifty major stocks weighted by market capitalization. In October 2007. NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India and between them are responsible for the vast majority of share transactions. The Nifty is a well diversified 50 stock index accounting for 22 sectors of the economy. banks. index based derivatives and index funds. the NSE VSAT terminals. A brief account of the same is given below. CNX BANK INDEX or BANK NIFTY is the index which has 17 banks listed on it and is a separate index to look upon price movements of banks share prices.6%. NSE is mutually-owned by a set of leading financial institutions.

The average total traded value for the last six months of all the CNX Bank Index constituents is approximately 14.The Indian banking Industry has been undergoing major changes. establishmen of asset reconstruction companies. Structural reforms in the banking sector have improved the health of the banking sector. t initiatives on improving recoveries from Non-performing Assets (NPAs) and change in the basis of income recognition has raised transparency and efficiency in the banking system. CNX Bank Index constituents represent abo 8. ATM Network. It provides investoRs and market intermediaries with a benchmark that captures the capital market performance of Indian Banks. The average total traded value for the last six months of CNX Bank Index stocks is approximately 95. The index will have 12 stocks from the banking sector which trade on the National Stock Exchange.63% of the total market capitalization on ut January 30. CNX Bank Index is an index comprised of the most li uid and large capitalized Indian Banking stocks. CNX tion of the banking Bank Index stocks represent about 86.86 of the traded value of all stocks on the NSE. 2009. Electronic transfer of funds and uick dissemination of infromation. In order to have a good benchmark of the Indian banking sector.85 of the traded value of the banking sector. 2 2 2 1 1 34 . Spurt in treasury income and improvementin loan recoveries has helped Indian Banks to record better profitability. The reforms recently introduced include the enactment of the Securitization Act to step up loan recoveries. India Index Service and Product Limited (IISL) has developed the CNX Bank Index.06 of the total market capitaliza sector as on January 30. reflecting a number of underlying developments. Advancement in communication and in fromation technology has facilitated growth in internet-banking. 2009.

4 332.47 4.35 1.45 1067.14 3.8 45.75 27584.67 32902.95 234. Kotak Mahindra Bank Ltd.2 110.65 3.79 30.83 115222.35 219.1 411. ICICI Bank Ltd.85 Mkt. CNX BANK INDEX CNX BANK INDEX CNX BANK INDEX CNX BANK INDEX CNX BANK INDEX CNX BANK INDEX CNX BANK INDEX CNX BANK INDEX CNX BANK INDEX CNX BANK INDEX CNX BANK INDEX CNX BANK INDEX TOTAL Axis Bank Ltd.4 165. Cap.81 5. Oriental Bank of Commerce Punjab National Bank State Bank of India Union Bank of India 35 3 Index/Exchange Compan Name Close Price 414. in Rs Mn 148969.1 146.17 85365. IDBI Bank Ltd.34 Weightage 6.ANALYSIS OF BANKING SECTOR A small report of Market Capitalization for 31st March.03 18.23 3. Bank of Baroda Bank of India Canara Bank HDFC Bank Ltd.6 97547.68 74176.56 2241324.91 67937 414062.42 129731.23 5.52 1.7 973. 2009 is also shown here.47 16.4 282.21 677480.52 370343.31 100 .

FUNDAMENTAL ANALYSIS OF STAT ANK F INDIA ICICI (Industrial Credit and Investment Corporation of India) ANK 36 .

FUNDAMENTAL ANALYSIS OF ICICI (Industrial Credit and Investment Corporation of India) ANK 37 .

a network of 1.419 branches & extension counters. about 4.FUNDAMENTAL ANALYSIS OF ICICI BANK LTD COMPANY PROFILE ICICI Bank (formerly Industrial Credit and Investment Corporation of India) is India's largest private sector bank in market capitalization and second largest overall in terms of assets.713 ATMs and 310. Mumbai and the National Stock Exchange of India Limited and its ADRs are listed on the New York Stock Exchange (NYSE). SHAREHOLDING PATTERN (%) 4 SHAREHOLDING PATTERN OF ICICI BANK LTD 7% 27% MF/ anks/indian FIs FIIs/NRIs/ C S 66% Indian public 5 6 5 BALANCE SHEET OF ICICI BANK 38 . venture capital and asset management. life and non-life insurance.ICICI Bank has total assets of about USD 79 Billion (end-Mar 2007).000 customers at March 31. ICICI Bank offers a wide range of banking products and financial services to corporat and retail e customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking. 2009. the Stock Exchange. ICICI Bank's e uity shares are listed in India on stock exchanges at Kolkata and Vadodara.

746.114.00 0.62 379.114.60 120.73 0.00 49.01 Assets Cash & Balances with RBI Balance with Banks.02 218.901.60 94.94 -.892.00 19.80 7.71 444.82 67.96 803.618. Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs) 39 .29 11.40 181.430.71 694.51 43.501.00 48.36 463.69 0.17 15.93 363.347.114.678.69 285.57 296.29 0.536.96 17.323.642.72 27.399.71 3.300.29 1.89 1.12 3.671.214.89 0.359.62 0.419.280.948.113.92 36.18 363.991.399.883. -Mar '10 1.23 218.263.310.00 24.43 3.00 50.48 0.503.33 12.463.00 51.801.85 103.212.597.300.058.00 350.443.43 379.205.Balance Sheet Mar '09 Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities 1.514.in Rs. Cr.09 3.31 7.163.37 202.84 38.016.

PROFIT AN LOSS OF ICICI Profit & Loss account Mar '09 Income Interest Earned Other Income Total Income 31.159. Cr.224.87 25.17 3.32 6.931.99 1.98 0.65 6.452.48 619. -Mar '10 Expenditure Interest expended Employee Cost Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalised Operating Expenses Provisions & Contingencies Total Expenses Net Profit for the Year Extraordinary Items Profit brought forward Total Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt Balance c/f to Balance Sheet Total 40 .55 8.21 33.008.43 32.210.03 0.99 3.04 36.81 28.092.10 35.14 1.809.867.834.974.024.795.57 1.501.117.925.65 6.60 4.04 1.93 1.58 2.00 444.36 17.79 6.22 1.00 10.72 678.94 2.63 0.292.95 164.193.58 151.436.725.79 2.42 0.87 0.977.971.31 22.01 1.464.758.999.098.056.38 6.10 120.50 2.00 10.01 1.22 0.00 2.in Rs.193.70 5.00 1.00 463.13 -0.76 39.809.221.63 -.337.93 7.834.780.00 1.592.76 110.706.375.37 4.

10 5.76 2010 12.00 48.14 14.14 0.60 7.17 0.70 37.60 0.00 49.09 4.13 5.58 9.79 36.74 0.31 7.KEY FINANCIAL RATIOS OF ICICI BANK RATIOS Dividend Per Share Operating Profit Per Share (Rs) Net Profit Margin Total Assets Turnover Ratios Asset Turnover Ratio Current Ratio Quick Ratio Dividend Payout Ratio Return on Net Worth(%) Earnings Per Share 2009 11.10 41 .80 12.58 33.94 36.

given i s market-leading b sinesses across the financial services spectrum. as well as the F continued focus on cost controls should provide some support to the Bank·s / account. This is dequacy. The Bank·s apital Tier 1 capital. going forward. while building the necessary base for strong D C C@ to be achieved through a substantial branch expansion. I believe that the Bank is decisively executing a credible strategy of consolidation that should result in an improved deposit and loan mix and consequently in imp roved operating metrics over the medium term. without diluting the current focus on stringent cost-control measures. though with a lag effect until the macro-environment starts improving again (hence. C @ dequacy is also amongst the highest at 17. while the C @ sset-quality deterioration is likely to start plotting only after a few quarters. potentially in 12 -18 months). The management has indicated that cost rationalizations still in process to further bring down the operating expenses. 42 E C @ @ @ 7 mobilization.4%. the increased focus on Treasury as a profit-centre. B 9 A 9 The strategy involves maintaining strong capital adequacy in the current environment. In the short term. with a substantial 13. are a precursor to market share gains that will contribute to a substantial ore business growth.OUT OOK AND VALUAT ON 8 I have a posi ive view on I I I Ban . It is focusing again on replacing wholesale funds with retail deposits in the international subsidiaries as well. .1% I believe that the Bank·s substantial branch expansion and large apital especially on Tier 1. Moreover.

FUNDAMENTAL ANALYSIS OF SBI (State Bank of India) 43 .

The bank is entering into man new businesses with strategic tie ups ² Pension Funds General H H I I H I I I G I I I P H H P I H G G Insurance Custodial Services Private Equit H H I H H Mobile anking Point of Sale Merchant Acquisition Advisor Services structured products etc ² each one of these initiatives having a huge potential for growth.9 G promoters FIIs .4 MFs/ TI anks/Fis others R Q 5 Q 10.8 Q 15.FUNDAMENTAL ANALYSIS OF SBI COMPANY PROFILE: The State ank of India the countr ·s oldest ank and a premier in terms of balance sheet si e number of branches market capitali ation and profits is toda going through a momentous phase of Change and Transformations ² the two hundred ear old Public sector behemoth is toda stirring out of its Public Sector legac and moving with an abilit to give the Private and Foreign anks a run for their mone . SHAREHOLDING PATTERN SHAREHOLDING PATTERN OF SBI LTD 44 G Q 9 Q 59.

70 1.116.831.73 61.947.BALANCE SHEET OF SBI Balance Sheet Mar '09 Capital and Liabilities: Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities 634.857.41 263.60 907.073.88 634.07 11.964.15 285.790.83 80.697.63 7.449.713.in Rs.23 103.96 10.57 964.82 0.00 65.37 166.603.949.917.88 634.68 795.98 631.44 37.17 48.20 804.76 -.06 912.76 275.63 542.32 0.88 0.503.892.08 614.70 742.786.90 4.336.011.038.312.08 55.87 34.413.74 429.00 57.432.574.828.290.04 1.733.00 57.053.73 295.00 0. -Mar '10 Assets Cash & Balances with RBI Balance with Banks.88 0.00 0.713.432.413.65 3.81 110.127.13 53.06 6.00 65.546. Cr. Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs) 45 .47 152.914.27 964.18 35.403.73 634.117.

14 8.038.65 236.66 6.35 76.PROFIT AN LOSS OF SBI Profit & Loss account Mar '09 Income Interest Earned Other Income Total Income 63. -Mar '10 Expenditure Interest expended Employee Cost Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalised Operating Expenses Provisions & Contingencies Total Expenses Net Profit for the Year Extraordinary Items Profit brought forward Total Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt Balance c/f to Balance Sheet Total 46 .962.in Rs.39 0.888.15 248.73 6.00 1.41 -.915.53 76.00 0.15 85.60 67.57 0.993.123.00 24.00 1.495.34 9.14 529.358.00 18.43 12.65 7.06 763.90 2.141.747.03 143.55 9.34 9.166.76 6.941.968.121.78 42.67 290.75 0.788.18 0.00 0.34 9.904.48 12.66 7.00 0.92 14.122.50 2.691.15 306.089.76 144.166. Cr.57 70.479.319.810.37 300.05 0.00 1.00 912.322.532.841.34 9.898.23 932.23 0.07 47.02 9.29 9.31 5.796.121.725.01 4.

37 47 .00 229.54 0.36 13.07 23.04 5.KEY FINANCIAL RATIOS OF ICICI BANK RATIOS Dividend Per Share Operating Profit Per Share (Rs) Net Profit Margin Total Assets Turnover Ratios Asset Turnover Ratio Current Ratio Quick Ratio Dividend Payout Ratio Return on Net Worth(%) Earnings Per Share 2009 29.89 144.04 12.74 143.26 0.03 0.09 7.09 7.00 230.67 2010 30.74 22.90 15.63 10.04 9.20 0.

7x W T FY10 /B . ` Y X t current price of s 1851 the stock is trading at ~1. we believe BI will be a major U T S beneficiary of pickup in credit demand. BI·s non banking subsidiaries ( BI T T Markets. 3) Margin compression T T 48 T T T apital . V T 4) sset quality headwinds (especially the concerns over the higher proportion of restructured assets and low loan loss coverage) subsiding as economy returns to a secular growth path. 2) lower credit growth. BI Mutual Fund and BI Life Insurance) will benefit from uptick in capital W V markets and corporate activity. Key Risks include: 1) harper than expected asset quality deterioration. We maintain a Buy on BI with a target of s 2054. W VU Y 2) ebound in earnings growth (23 ² 25% W G from FY 10 ² FY11) on back of higher credit growth and strong fee income performance. on account of: 1) ickup in credit demand (we estimate BI·s FY 10 credit growth at 20% and FY 11 at 22%) will allow the bank to redeploy surplus liquidity to advances from investments. giving an upside potential of 12% from the current levels.OUTLOOK AND VALUAT ON With its surplus liquidity and balance sheet size. 3) harp pickup in margins in FY11 as high cost deposits are reprised and yields improve.

The LIQUID RATIO standard is 1:1. 49 . An ICICI bank shows good increase in the ratio as compare to the SBI. This ratio shows how well the fixed asset are utilised. So ICICI bank is good and company will able to pay all immediate obligations DIVIDEND PAYOUT RATIO This ratio indicates that company has to pay the dividend in each and every year.SBI shows 9.70:1. The standard CURRENT RATIO ratio is 2:1.04 :1. This statement shows immediate short term solvency of the company.ANALYSIS RATIO INTERPRETATION This ratio indicates the short term solvency of the company.70:1 and in the year 2010 and ICICI bank has respectively and ICICI bank has the ratio of 14.36.14:1which is good as compare to SBI bank which has a ratio of 0. but the ICICI bank has the ratio of 0.31 and SBI is 23. The dividend payout ratio of ICICI is 37. Which shows that the dividend policy of ICICI is more than the SBI? FIXED ASSET TURNOVER RATIO This ratio establishes a relationship between net sales and net fixed asset.

Which shows that the SBI has not a good return as compare to ICICI RETRUN ON NET WORTH This ratio shows how much the company get return on their net worth.This ratio is used to know the operating efficiency of the company.80 as compare to the SBI i. ICICI bank net profit margin is 12. This shows that the SBI has a good capital with it.54.36 which indicate that the operating efficiency of the SBI is not so good. The ICICI bank has 7. The operating profit. ET PROFIT MARGIN This profit is calculated after tax and depreciation and this ratio shows the net profit of the company.e.79 and the SBI shows 13. The operating profit of the OPE T PROFIT MARGIN ICICI is less i.e. 50 .17 and the SBI is 10.89. 23. 49.

 Learn what the ratings mean and the track record of an analyst before jumping off the deep end. and every analyst has some sort of bias. 51 . The profit pool of the Indian banking industry is probable to augment from US$ 4. thus the banking industry is also not far behind.  Investors should become skilled readers to weed out the important information and ignore the hype. they are an important Personal Research tool for companies. If you are reading research written by a sell-side analyst. There is nothing wrong with this. but it should be approached with caution. and the research can still be of great value. This growth and expansion pace would be driven by the chunk of middle class population. but they should be read with a healthy degree of scepticism to separate the facts from the spin.CONCLUSION The Indian banks are hopeful of becoming a global brand as they are the major source of financial sector revenue and profit growth. the domestic credit market of India is estimated to grow from US$ 0. The financial services penetration in India continues to be healthy. it is important to be familiar with the analyst behind the report.  Fundamental analysis can be valuable.  We all have personal biases.  Press releases don't happen by accident. As a result of this.4 trillion in 2004 to US$ 23 trillion by 2050.8 billion in 2005 to US$ 20 billion in 2010 and further to US$ 40 billion by 2015.  Corporate statements and press releases offer good information. the profit for the Indian banking industry will surely surge ahead. The increase in the number of private banks.

moneycontrol.com 52 .com www.investorpedia.com www.statebankofindia.WEBLIOGRAPHY www.icicibank.com www.

You're Reading a Free Preview

/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->